Bitcoin plummeted to $113,164 on Friday, losing nearly 8% in just a few hours and causing over $200 million in liquidations. This drop coincides with the former president Donald Trump's radical political moves and increasing geopolitical tensions between the U.S. and Russia.
The strong market downturn reflects growing investor anxiety as Trump returns to politics with controversial foreign policy statements and attacks on U.S. economic institutions.
Trump orders submarine repositioning amid tensions with Russia
Trump's latest post on Truth Social revealed a major military action: he ordered the movement of two nuclear submarines amid threats from Dmitry Medvedev, the Deputy Chairman of the Russian Security Council.
Medvedev dismissed Trump's request to end the war in Ukraine within ten days, viewing it as "a step towards war." Trump responded, stating that there are now "unintended consequences" as military assets are moved.
The market quickly reacted to the escalation, with Bitcoin leading the decline. Risky assets stalled as the prospect of renewed nuclear tensions worried global investors.
Trump criticizes Fed data and jobs ahead of the election
In a series of separate posts, Trump accused Labor Commissioner Erika McEntarfer of distorting employment figures to boost Vice President Kamala Harris's chances in the 2024 election. He demanded her firing and called the numbers "falsified."
Trump also criticized Fed Chairman Jerome Powell, calling him "a stubborn idiot" and demanding immediate interest rate cuts. He urged the Federal Reserve Board (Fed) to find ways to bypass Powell's control, an unprecedented proposal, breaking the independence of the central bank for decades.
Fed Governor Adriana Kugler resigns, paving the way for Trump
Amid increasing political pressure, Federal Reserve Governor Adriana Kugler resigned on Friday. While no specific reason was given, Kugler's early resignation leaves a key position at the central bank - a position Trump may appoint.
Kugler, who was appointed by Biden and a strong advocate for interest rate stability, did not participate in this week's policy vote. Her resignation further increases instability at a time when the credibility of institutions is threatened by senior positions.
Bitcoin in the crosshairs of political and market instability
The sharp decline in Bitcoin reflects the market's risk-averse sentiment amid global instability. Currently, Bitcoin's price is down 7% from the all-time high of $123,182 achieved a few weeks ago. Analysts point out that tightening futures premiums and reduced leverage activity are signs that upward momentum is weakening.
Contrary to expectations that Bitcoin would be a safe haven amid political conflict, the asset is following the trend of tech stocks, undermining the view that it is a safe haven. Investors are now shifting to short-term bonds and cash.
Gold also remains steady around $3,350, but even this price provides little comfort.
Dalio reassesses Bitcoin amid concerns over U.S. public debt
Amid the chaos, some long-term investors are reevaluating Bitcoin's outlook. Ray Dalio, founder of Bridgewater Associates, now recommends allocating up to 15% of an investment portfolio to Bitcoin or gold as a hedge against inflation and debt.
"The U.S. is starting a debt spiral", Dalio warns, referring to the Treasury's $12 trillion forecast. While cautious about Bitcoin's volatility, he acknowledges its evolving nature as a store of value.
Conclusion
The drop of Bitcoin below $115,000 is not merely a matter of price volatility - it is also a sign of a broader wave of investor flight due to political instability and economic skepticism. As Trump reshapes the narrative around nuclear policy and the integrity of the economy, the future trajectory of Bitcoin will be determined not just by charts but also by politics.